Builders fail to attract buyers: New multi-storeyed projects

[Naveed Yaseen]

By Aamir Shafaat Khan
KARACHI, Nov 4: Fear of encroachment is said to be a key factor that has driven many builders to roll new projects out in haste despite dull investment sentiments in real estate amidst falling property prices.

Builders have virtually invaded the print media. They are investing heavily on advertisement on expensive front and back pages of newspapers coupled with hectic campaign on electronic media to lure investors and general public by offering attractive and high discount on booking and not on full payment.

Some builders offer discount up to Rs140,000 on booking and not on full payment besides assuring no quarterly or six monthly payments.

As many as 15-25 new projects of multi-storeyed apartments have been launched in Karachi and Hyderabad, but the builders say that the response from the general public has been lukewarm owing to various reasons.

Builders used to launch aggressive advertisement campaigns on the eve of Eidul Fitr and Eidul Azha when most of the overseas Pakistanis return home to celebrate these occasions with their families.

Hafiz-ur-Rahman Butt, former chairman of the Association of Builders and Developers (ABAD), said that this was a new trend that projects were being launched in an “off season.”

In his view one of the possible reasons for this were land encroachers who had become active in Scheme 33, adjacent areas of Gulshan-e-Maymar and Gulistan-e-Jauhar.

The builders have started initial work at the sites of these new projects like opening of booking offices and undertaking construction work at a very slow pace to involve third party (genuine public who are booking apartments) in order to safe their land from being encroached.

He said that due to rising cost of living caused by surging food prices, the response of general public had been unsatisfactory. He claimed that the new projects, launched in Ramazan, were being offered at lower prices.

He also claimed that most of the projects were initiated by ABAD members who had engaged marketing companies to promote them. “The advertisements do not mention that the owner of the project is an ABAD member,” he said.

A leading builder and member of ABAD, who asked not to be named, offered same views as of Hafiz Butt saying that the “fear factor about plot encroachment by land grabbers” is the main reason behind the launch of new projects.

He claimed that the prices of these new apartments were 25 per cent lower keeping in view the current economic situation and consumers’ squeezing buying power.

However, market sources said that rising land grabbing activities either under the patronage of political parties or under some influential land mafia groups, might be one of the reasons and the builders knew how to deal with it, but there were some other reasons to launch new projects.

They said that the builders perhaps had smelled a change in Dubai and Ajmaan where property prices were falling and Pakistani investors/builders had been trying hard to pull out after the governments of these investment paradises had made some changes in rules and regulations.

The local builders must be anticipating arrival of Pakistani investors from Dubai and Ajmaan in search of some new investment avenues.

Owner of Pak Estate in Clifton Abdul Wahab Parekh was apprehensive as he expressed doubts about reliability of 70 per cent of the projects being launched by newcomers. He said that only 25-30 per cent of launched projects belong to builders having sound reputation.

He feels that many projects do not look viable at the price they are being offered. He said that some people were offering apartments at Rs1,500-2,000 per square ft. while the known builders were demanding Rs2,500-3,000 per square ft. “How could they manage a housing project at such low rates when the cost of construction is climbing vertical heights,” he said.

He feared that the new builders were out to swindle money of unsuspecting investors and that was why they kept prices too low to attract general public. “Their target is to recover the plot price first,” he added.

He added that despite low prices, the public response had been very poor owing to high inflation and perception of risk in the current economic and political turmoil.

He agreed that the fear of encroachment was very much there, but the builders know how to manage this problem.

Mr Wahab said that people invested heavily in Dubai and Ajmaan, were facing problems and opting to pull back where possible. “They are facing problems in reselling the apartments and flats at even cost-to-cost basis”.

http://www.dawn.com/2008/11/05/ebr1.htm